Loans to consumers not only crowd out more productive loans that might have been made to business, but they have a far greater likelihood of ending in default. In addition, while business loans increase our capital stock and lead to greater productivity, loans made to consumers are merely spent, and do not create conditions that will make repayment easier. When businesses borrow to fund capital investments, the extra cash flows that result are used to repay the loans. When individuals borrow to spend, loans can only be repaid out of reduced future consumption.
Excellent point here.
15 posted on 01/17/2009 3:57:56 PM PST by Alberta's Child
(I'm out on the outskirts of nowhere . . . with ghosts on my trail, chasing me there.)